IF only all company directors could go out on such a high.
Five years after establishing Forge Group, Peter Hutchinson and Andrew Ellison are leaving the business.
Over that time, the company’s market value has risen from $12 million to about $400 million, equal to a share price gain of 833 per cent.
Remarkably, the growth has been achieved with only one small capital raising.
Having built up the business, Mr Hutchinson insists it is time to hand over to someone better qualified.
“I come from a small company background,” Mr Hutchinson told WA Business News.
“I have a very proprietary approach, I’m very hands on, but I can’t keep doing that.
“This business needs to be more structured and, dare I say it, more disciplined.”
Mr Hutchinson wants to ensure Forge doesn’t enter the “graveyard of mining services contractors that have come unstuck”.
“There are a lot that come unstuck because they get ahead of themselves. I don’t want to fail,” he said.
The benchmark for every other mining services company is Monadelphous, Mr Hutchinson said, which has had a remarkable run of success since John Rubino took charge 25 years ago.
“They are the benchmark; that’s the company we all want to be,” Mr Hutchinson said.
He said Forge had been on a fast track to growth, and now was the time for the new board and management to take charge.
Mr Hutchinson, who until recently was executive chairman, will be leaving the business at the end of July.
Mr Ellison, who kept a low media profile while running Forge’s construction arm – just like his brother Chris Ellison at Mineral Resources – will be resigning as an executive director on the same day.
The third co-founder, Greg McCrostie, who previously worked at Joe Ricciardo’s JR Engineering business, will continue as managing director of the Abesque Engineering division.
Chairman David Craig leads the new board; new managing director David Simpson (from United Group), and new chief operating officer Brett Smith (from Ausenco) will join him shortly.
These changes are part of a transition process that has been 18 months in the making.
While Forge Group’s success has lifted Mr Hutchinson’s profile, it was not widely known that Forge was his second significant business venture.
He was also involved with Vysart, an unlisted investment company that owned five different manufacturing, engineering and construction businesses.
Its chairman was John Saleeba, and
co-investors included stockbrokers Aaron Constantine and Murray McGill.
Mr Hutchinson said he had a very hands-on role, actually running the businesses before they were sold as part of an agreed winding up of Vysart.
“We didn’t just buy them and dress them up for sale, we ran them,” he said.
The one business that wasn’t sold was Webb Construction; it became aiConstruction, which was part of listed company ai Limited.
A demerger in mid-2007 resulted in ai shareholders having an equal stake in two companies – the automotive arm became Autodon, and has struggled ever since, while the construction arm became Forge Group.
Soon after Forge was listed, it acquired construction company Cimeco and engineering
company Abesque, and the three executive directors – Hutchinson, Ellison and McCrostie – set about building the business.
The strategic plan that guided its growth was condensed to one page – something Mr Hutchinson believes is a prerequisite for a good strategic plan.
The plan involved adding more services, so that Forge wasn’t always the second contractor on site working for someone else. The goal was to be the first contractor on site.
It brought together mechanical, civil, and electrical engineering with its construction capabilities.
“We did design and construct, but we were always construction led, that was our culture and background,” Mr Hutchinson said.
Other firms, by contrast, tended to be engineering-led.
The Forge strategy gave the firm the capacity to offer more services and take on larger contracts.
That has been apparent as its contract wins have grown in size. One of its largest wins was a $200 million EPC contract with Fortescue Metals Group for the Solomon iron ore project.
Mr Hutchinson said his role was to run Forge Group and he left Mr Ellison to run Cimeco and Mr McCrostie to run Abesque; but that needs to change.
“Forge needs to evolve as a group rather than as a number of subsidiaries,” he said.
This need has been reinforced by the acquisition early this year of power generation business CTEC, and the intention to add new business units focusing on maintenance and building.
Mr Hutchinson said he had been surprised by Clough’s approach after the engineering and construction giant acquired a strategic shareholding in 2010.
“We thought they’d be more integrated into our business,” he said.
On the positive side, he has also been surprised by the extent to which Forge has benefited from Clough’s reputation and profile.
Apart from a one-month road trip to the Kimberley, Mr Hutchinson said he has no plans.
“I haven’t got another job, I don’t know what I’m going to do.”
